September 18, 2013
Yesterday, a reader named Brian asked me the following question:
If the cost of an appliance (and its delivery, say) were the same at Home Depot, Lowes, and Sears, where would you buy the appliance and why and how would you do it?
I really like this question because it shows a real world situation and an opportunity to earn lots of points and/or save lots of money. I don’t know how much money Brian intends to spend, but for the sake of this post let’s assume he’ll buy a total of $3,000 worth of appliances. What is his best option?
Forsaking credit card warranties
Most opportunities to maximize point earnings and savings involve buying and using gift cards. It is important to understand, though, that when you buy things with gift cards you give up the automatic protections offered by your credit card. A good credit card will offer price protection and extend the manufacturers warranty by a year. How much is this piece of mind worth to you? Buying gift cards could save you 10% or more. If you were about to spend $3000, would you be willing to give up $300 for the peace of mind offered by your credit card? For the rest of this post, I’ll assume that the answer is no. Let’s take a chance that things will go right!
The Home Improvement gift card
If I were asked the same question six months ago, I would have said that step one is to go to Office Depot with your Chase Ink card and buy $3K worth of $500 Home Improvement gift cards. I had done experiments showing that I could triple dip with Sears and Lowes by buying Home Improvement gift cards to get 5 points per dollar, then going through an online portal to buy Sears or Lowes gift cards to get more points, and then going through a portal again to Sears or Lowes to use the gift cards. Since then, though, most of the steps described above have broken down. Office Depot no longer allows the sale of Home Improvement gift cards with a credit card (although some readers say that their local Office Depot stores still allow it – mine does not). Sears stopped allowing the purchase of their gift cards with Home Improvement gift cards. And, some readers have reported problems trying to buy Lowes’ gift cards this way as well.
If you have a card that offers bonus points at a grocery store or drug store, the triple dip described above might still work with Lowes: 1) buy the Home Improvement card at a grocery store or drug store; 2) go through a portal to buy Lowes’ gift cards; and 3) go through portal to use gift cards. That’s a lot of work, though, for a payoff that might not happen. For this post, I’ll assume that Home Improvement cards are not an option.
Buying gift cards
Assuming we know that we’ll be spending $3,000, the first step is to find the best option for buying $3,000 worth of gift cards. In the post “Best options for buying merchant gift cards,” I listed quite a few good options. Let’s examine some of them, in detail:
Secondhand gift cards
GiftCardGranny.com shows current rates for buying secondhand gift cards from resellers. At the time of this writing, GiftCardGranny lists the following rates (ignoring EBay auctions):
- Home Depot: 9.9% discount
- Lowes’: 9% discount
- Sears: 7.4% discount
It makes sense to also check Kmart and Lands’ End gift cards since they also work at Sears:
- Kmart: 7.1% discount
- Lands’ End: 7.1% discount
As you can see, you could save from 7.4% to 9.9% off the bat by buying gift cards from resellers. In practice, though, it might not be so easy. Often a reseller will have just a few cards available from any one merchant so getting $3K worth of gift cards could be tough. And, as you’ll see below, we can do better…
Ink + portal + Staples.com
Staples.com sells Sears, Home Depot, and Lowes gift cards online. And, if you buy e-gift cards, there is no fee for shipping and handling. Go to Staples.com via an online portal and pay with a Chase Ink card to get 5 points per dollar. Portal rates change frequently, so it makes sense to search for the best current option through a portal finder such as cashbackholic.com and/or evreward.com. At the time of this writing, the best options are 3X through the Ultimate Rewards Mall or 5% cash back through uPromise. Let’s assume for now that we’ll go for 5% cash back. In that case, after buying $3000 worth of gift cards and paying with a Chase Ink card, you would earn $150 cash back and 15,000 Ultimate Rewards points.
Sears and Home Depot gift cards top out at $200 each whereas Lowes’ gift cards top out at $500 each.
SimplyCash + OfficeMax.com
OfficeMax.com does not award portal points or cash back for gift card purchases, but they do provide automatic cash back via American Express’ OPEN Savings program. All Amex small business cards include OPEN Savings. With OfficeMax.com and OPEN Savings, you get 5% cash back for online purchases up to $250, and 10% cash back for online purchases over $250. If we mix in the Amex SimplyCash business card which earns 5% cash back at office supply stores automatically, you then have an easy path to 15% cash back! OfficeMax.com sells only physical gift cards and they charge a 99 cent fee for each. Both Home Depot and Lands’ End (e.g. Sears) gift cards are available in denominations of $100:
With this approach, you would have to buy 30 $100 gift cards and pay $29.70 in fees. In return, you would get 15% cash back. $3029.70 x 15% = $454.46. Your profit would be $454.45 – $29.70 = $424.75, which is equivalent to 14.16% savings!
ShopDiscover + Plink + Sears
A third option is to sign up for Plink and enroll your Discover It card and put Kmart in your Plink wallet. Then, go through Shop Discover to Sears to buy physical gift cards. To maximize Plink rewards, buy just one $50 gift card at a time, complete check out, then go back through the portal and start again. For each purchase, you should earn $3 (6%) in Plink points, $5 (10%) from ShopDiscover, and 50 cents (1%) from the Discover It credit card. That’s a total of 17% savings! You can do even better by redeeming your Discover cash back for Lands’ End gift cards at 20% off. Let’s walk through an example:
- Using the above method, buy $2650 worth of Sears’ gift cards. You’ll earn $291.50 in Discover Cash and $159 worth of Plink points.
- When redeeming Discover Cash, you can buy $100 Lands’ End gift cards for $80 or $50 Lands’ End gift cards for $40. Use $280 of your $291.50 in Discover Cash to buy three $100 cards and one $50 card. You now have a total of $3000 worth of Sears’ (plus Lands’ End) gift cards, $11.50 in Discover Cash, and $159 worth of Plink points.
- Remember that you’ve spent only $2650 out of pocket, so you saved 11.67% right off the top and you earned $159 + $11.50 = $170.50 worth of rewards, which is an additional 5.7% giving you a grand total of 17.4% savings.
This is obviously an extreme option. It would require 53 separate Sears’ gift card purchases and a potentially long wait for Discover rewards. If you skip the part of using Discover cash to get Lands’ End gift cards, you can speed things up a lot and still do almost as well, but that would mean 60 separate Sears’ gift card purchases. And, when you go to use those gift cards, can you even imagine having to scratch off 60 little silver strips and type in all those numbers. No thanks. This is a great option for maximizing savings, but a terrible option if you value your time!
ShopDiscover + Plink + Sears option 2
In the fourth quarter, the Discover It card offers 5% cash back (up to $1500 in spend) for online purchases. You can simplify savings by going through the ShopDiscover portal to Sears to buy physical gift cards and pay with your Discover It card. Of course, wait until the promotion begins on October 1 and make sure to register for the 5% promotion. This would be a nice easy way to get 15% cash back for $1500 worth of Sears gift cards. I would recommend breaking the purchases into at least three separate $500 purchases, though. Sears seems to take much longer to pay out to portals when purchases are very large.
Buying gift cards, quick summary:
- Buy secondhand: 7.4% to 9.9% savings.
- Buy $200 Sears, $200 Home Depot, or $500 Lowes gift cards with Ink card at Staples.com via portal: 5% savings plus 5X points.
- Buy $100 Lands’ End (Sears) or $100 Home Depot gift cards at OfficeMax.com with SimplyCash card: 14.16% savings.
- Buy $50 Sears’ gift cards via ShopDiscover: up to 17.4% savings.
- Buy three $500 Sears’ gift cards via ShopDiscover in the fourth quarter: 15% savings.
When you’re ready to buy your appliances, you can save even more money or earn even more points by shopping through an online portal and paying with the gift cards you bought earlier. Even though ShopDiscover often has the best cash back rates, I don’t recommend using this portal if you plan to pay with gift cards. Some people have had their cash back clawed back in those situations. Instead, consider the following current options:
- Sears: 5X via the Ultimate Rewards Mall; or 8% cash back via MrRebates
- Lowes: 5% cash back via uPromise; or 3X via Ultimate Rewards Mall, or 3X via AAdvantage eShopping
- Home Depot: 4X via the Ultimate Rewards Mall; or 5% via TopCashBack
As you can see above, the current options for cash back and point earnings are fairly small compared to what’s possible when buying gift cards. As a result, if you can get a better deal in-store, go for it.
If you’re planning a move, you might as well make the most of it and get 10% off coupons from Lowes and Home Depot. To get your coupons, sign up at the following sites:
Last I checked, Lowes will send a coupon good for 10% off, up to $3000 in spend (in-store or online). And, Home Depot will send a coupon good for 10% off, up to $2000 in spend (in-store only). Keep in mind that each store will honor the other’s coupons.
Sales, promotions, price matching, and more
The premise of this post was that all three stores offered the same appliances for the same price. In real life, that’s unlikely, but you should be able to get any of these stores to match the best available price at any other store with a physical presence in your area. In fact, both Lowes and Home Depot have price match guarantees in which they say that they’ll meet the competitor’s price and give you an additional 10% off. To get these discounts, though, you will most likely have to buy in person and give up the 10% moving coupon. That is, you’ll have to give up the extra 10% if you don’t know the trick of how to apply both (see “Extreme savings at Lowes“). So, even once you’ve committed to a particular store (by buying lots of gift cards, for example), keep your eye on sales, at all stores, for the products you want. You may be able to save even more.
Also watch out for special promotions. Sears often offers their ShopYourWayRewards members special promotions in which they can earn 5%, 10% or even more back in the form of ShowYourWayRewards points (normally, you earn just 1% back).
For an overview of even more extreme opportunities, please read “Extreme savings at Lowes“.
The approach I’d take
If it were me and I had some time, I’d watch and wait for special promotions to crop up. Keep an eye on sales on the appliances you want and be ready to jump on them when they pop up. An ideal situation would be one in which a store offers an excellent promotion (such as Sears offering 25% back in rewards) and a competitor offers the items at a great discount. In that case you could buy the items from Sears to qualify for the promotion, and submit an online price match form to get money back. With this watch and wait approach, you need to be able to get gift cards quickly. So, I would have my Chase Ink card ready to buy e-gift cards from Staples. These are usually delivered overnight. This wait and see approach doesn’t deliver the biggest savings through gift card purchases, but it leaves you open to jump on the best sales and promotions as they appear.
Waiting to hear Brian’s solution
I’m hoping that Brian will let us know what approach he decides to take. And, even better will be to hear about the experience once he has completed his purchases. Did his expected savings (or point earnings) materialize? What went right? What went wrong?
- Extreme savings at Lowes
- Best options for buying merchant gift cards
- Maximizing Home Improvement Spend
- The Home Improvement gift card
- Home Improvement gift cards lose their luster. Now what?
- Million Mile Madness: Banking on Lowe’s
- Million Mile Madness: A setback from Sears
- Million Mile Madness: Bumps in the road
- Million Mile Headaches: Lowes, Round 2